Kadin Predicts Indonesia's Economic Growth To Be At Least 4 Percent In The Second Quarter Of 2020

Chairman of Kadin, Rosan Roeslani. (Mery Handayani / VOI)

JAKARTA - The Indonesian Chamber of Commerce and Industry (Kadin) predicts that there will be a contraction of economic growth between minus 4 percent to minus 6 percent in the second quarter of 2020. This is because the stimulation process for handling COVID-19 is still very slow.

Chairman of Kadin, Rosan Roeslani, said that the slow handling of COVID-19 can be seen from the absorption in various fields. For example, in the health sector, which only reached 1.54 percent, social protection 28.63 percent, business incentives 6.8 percent, MSMEs 0.06 percent, corporate zero percent, and sectoral 3.65 percent.

"This will make the pressure on health recovery, social security networks and the economy heavier," he said, in a written statement received by VOI, Thursday, July 2.

Rosan assessed that the weak implementation of the stimulus will cause Indonesia's economic growth in the third quarter to contract again at a negative growth level. So that technically, Indonesia is entering an economic recession phase.

In terms of trade, the surplus achieved in April and May 2020 was due to a decline in imports of minus 18.6 percent year on year (yoy) in April and minus 42.2 percent yoy in May. Meanwhile, the decline in exports was minus 7 percent yoy in April and minus 28.95 percent yoy in May.

According to Rosan, given the significant role of the raw / auxiliary material category, which is around 70 percent of total imports by the end of May this year, it is estimated that domestic production for domestic consumption and exports will continue to be affected for some time to come.

From the investment side, it is estimated that the decline in the realization of foreign investment will further decline in the second quarter, compared to minus 9.2 percent in the first quarter. Meanwhile, the momentum of the increase in the realization of domestic investment cannot be expected. This is considering the low credit growth of 2.68 percent as of May 2020.

Furthermore, Rosan said, the uncertainty from COVID-19 not only affected trade and investment flows, but also decreased domestic purchasing power or consumption in the second quarter.

"The real sales index decreased by minus 16.9 percent in April yoy and minus 22.9 percent in May yoy, and the decrease in the consumer confidence index was minus 33.8 percent in April yoy and minus 39.3 percent in May yoy," he said. .

In addition, said Rosan, reallocating several things including long-term investment, from the budget posture for the benefit of economic recovery in the second quarter and the absence of flushing for optimal economic recovery will strengthen the economic contraction of around minus 4 percent to minus 6 percent in the quarter. II 2020.

Indonesia's Adaptability is Key

Post-pandemic COVID-19, said Rosan, Indonesia not only needs strength, but adaptive capacity or agility that can be produced in several ways.

First, the framework for economic recovery is not just about restoring purchasing power. However, it also maintains and increases production capacity so that Indonesia can continue to increase foreign exchange for future inclusive democracy and economic development.

"The government's attitude to increase the scale of the stimulus for economic recovery from 2.5 percent to 3.9 percent of GDP will affect the extent to which all sectors can rise up and open up additional jobs, competitiveness and foreign exchange," he said.

Second, digitization as a mode of information, communication, transportation, and transactions that are part of our daily lives. The more Indonesia can embrace the digital paradigm by increasing its focus on STEM or science, technology, engineering, and mathematics for the benefit of education and in particular increasing financial inclusion from 50 percent to the 80 to 90 percent range, then Indonesia can ensure adaptive capacity and wisdom in the distribution of welfare for the community.

Third, the tendency to shift from multilateralism to bilateralism will benefit whoever has the highest competitiveness. The only way to maximize the posture for future negotiations in an era that is thicker with bilateralization is by increasing competitiveness or marginal productivity for all goods and services.

Rosan said the increase in marginal productivity, as seen in developed countries like Singapore, has resulted in extraordinary adaptation capacity in an era marked by a lot of pressure or external changes.

"The policy program and stimulus which is fast in implementation, right on target and measured in overall size are very important things for the future of the nation and the Republic of Indonesia which we love," he explained.